Tesco has announced plans to invest £150 million in its online division, as it aims to refocus attention on its underperforming UK business.
The UK company plans to invest more than £1 billion in total to turn round its operations in the home market.
In its preliminary results for the year ended 25 February 2012, the company revealed that while group trading profit had increased by 1.3 percent to £3.8 billion, the UK arm’s profit was down one percent to £2.5 billion.
Philip Clark, Tesco’s chief executive, said: “Whilst our international business is delivering excellent growth, contributing £1.1 billion of profit to the group, we fully recognise that we need to raise our game in the UK.
“As a result, we are committing over £1 billion to make the UK shopping trip better for customers.”
Clark added: “We are also focusing our lower overall capital expenditure (£3.3 billion next year compared to £3.8 billion last year) more into our existing stores and in building our online businesses.”
The company said that it will be increasing its capital investment in online to around £150 million in 2012/2013.
“We have already made a strong start with our new web platform for Tesco Direct launched a few weeks ago,” it said.
“The new website, which has been well received by customers, will soon house almost all of our UK online businesses.”
Tesco said that the new website – which has more than 75,000 products for sale on it, double the amount compared to the previous site – has greater functionality and is easier for customers to use. It is also fully configured for mobile devices.
In addition, following the likes of e-commerce site Amazon, the site features third-party marketplace vendors selling their own products through Tesco.com.
“A much greater expansion of the product range and further platform upgrades are planned in the months ahead,” the company said.
The retailer provided an update on its Tesco Bank migration progress, revealing that it had nearly completed building the new systems and infrastructure for the business.
Tesco Bank has focused on a complex infrastructure and systems build for the last three years. It has so far migrated motor and household insurance, savings accounts and loans from a Royal Bank of Scotland (RBS) system onto the new platforms, and is scheduled to move credit cards over “shortly”.
The bank, which is fully run by the supermarket giant but was until 2008 a joint venture with the RBS, locked out online customers for three days in June 2011 as it experienced serious problems moving RBS data onto its own systems.
“Having taken the decision to slow down the introduction of new products until we have settled in the new bank team, processes and systems, following some technical issues last summer, this is an important milestone,” the company said.
However, it said that delaying the deadline for completion of the migration has led to increased costs.
“It also meant a temporary extension of the period during which the bank absorbs double running costs,” said Tesco.
Some 75 percent of the bank’s business is already done online, with a strong performance in the insurance business driving a 13.6 percent increase in total revenue for the bank last year.
This was helped by a change in the insurance operating model following the successful completion of migration of insurance products from the RBS platform, Tesco said.
It added: “Our new platforms have enabled some significant customer service improvements. For example, instant decisions are now available on loan applications and customers can now open and fund their savings account in 10 minutes (previously around two weeks).”